Cambodia has commenced construction on the $1.7 billion Funan Techo Canal, a project funded by its primary source of trade and investment, China. This ambitious infrastructure project aims to connect the Mekong River to the Gulf of Thailand, providing Cambodia with a vital new trade route and lessening Phenom Penh’s reliance on exporting through Vietnamese ports.

Beyond the economic impact, the canal’s construction has sparked geopolitical tensions over concessions to China’s use of the canal and the potential benefits the project portends for China’s naval assets, mainly smaller patrol boats and fast attack craft. Vietnam has also voiced apprehensions regarding the canal’s potential to alter water flows critical for its rice production in the Mekong​.

The construction of the Funan Techo Canal underscores the profound economic and security ties between Cambodia and China. Cambodia heavily relies on China for financial investment and military support. Beijing has positioned itself as Cambodia’s most crucial investor, financing numerous infrastructure projects, including roads, bridges, ports, and canals. This close relationship has been subject to allegations of China’s “debt-trap diplomacy.” To combat these claims, China has utilized an interesting strategy known as Build-Operate-Transfer (BOT), an interest-free financing process that initially includes total ownership and management of the asset by the foreign investor for a finite period, ending with the transfer of the asset to the government.